The planned sale of a struggling Iowa retirement home chain to an East Coast developer has been scuttled in part due to quality-of-care issues.
QHC Facilities, which has eight skilled nursing facilities and two assisted living centers in Iowa, filed for bankruptcy in late December. The company’s former owner, Jerry Voyna, died last year. His wife, Nancy, took over the business and filed for bankruptcy soon after. She died in January, leaving the business to her son, who began looking to sell the business and all of its assets.
In early March, a federal bankruptcy court judge approved the sale of QHC to Cedar Health Group, a holding company based in Lakewood, NJ Cedar is part of a network of companies led by real estate developer Mark Tress, which specializes in the acquisition of distressed properties.
The sale, however, fell through when Cedar Health began raising questions about quality-of-care issues that could impact QHC’s healthcare facility licenses.
In recently filed court filings, Cedar Health says it inquired about buying some or all of QHC’s assets, but backed out when it learned the sale would be at auction.
QHC says “almost literally within an hour or two” of the March 4 auction, a QHC broker urged Cedar Health to bid on the chain, even though Cedar Health had not met all the prerequisites for the auction . Cedar Health said it agreed to participate in the auction, which led the only competing bidder, Blue Diamond, to object due to failure to meet pre-auction requirements.
According to Cedar Health, QHC waived pre-tender requirements for Cedar Health because it was “desirous of having more than one bidder.” Cedar Health then became the highest bidder with $12.1 million and quickly returned a deposit of $605,000.
On March 22, however, the sale seemed threatened. Court records show that Cedar Health’s legal counsel wrote to QHC representatives, explaining that Cedar Health was trying to “determine whether any of the facilities are in imminent danger of decertification” due to quality of care issues. The attorney also noted that two of the QHC homes had been designated special facilities by the federal government, indicating a long, uncorrected pattern of serious violations.
In addition, the legal counsel said, Cedar Health had not yet determined whether quality-of-care citations issued by regulators would “endanger the licensing of facilities.”
QHC representatives responded, pointing out that the time to perform this kind of due diligence was before the auction, not after, and that qualified bidders had agreed that if they submitted the winning bid, they would take responsibility for the management of the chain of retirement homes at the latest. than March 18.
“We have now passed that deadline, but without a signed management agreement or a firm commitment,” QHC’s attorney told Cedar Health. “We would like this transaction to continue and want to work with you… However, we must think about the health, safety and well-being of residents and patients. As such, if signed management agreements and a commitment to wire $500,000 today are not received by noon CST today, we have no choice but to file a petition for urgency with the court to request a hearing on this matter, which will include approval to proceed. with the secondary bidder. »
Cedar Health then offered QHC $250,000 and asked for more time so it could gather information on the regulatory issues. QHC refused, then went to court for an emergency order allowing the chain to be sold to Blue Diamond, the relief bidder.
The court granted QHC’s request, and on March 24, Judge Anita L. Shodeen ruled that due to the “current financial instability” of QHC nursing homes and the lack of a management agreement concluded, it authorized the sale of the chain to Blue Diamond.
The “unknown status of the transaction” with Cedar Health, she ruled, “endangers the health, safety and well-being of the residents” of the QHC facilities. Cedar Health is now asking for the return of its deposit and QHC is resisting.
The fate of a wrongful death claim made by the family of Gladys Van Sickle, who died after allegedly sustaining broken bones in a fall at QHC’s Winterset North facility in Madison County, remains to be determined. A trial in that case is scheduled for October 2023, but the bankruptcy court may first have to deal with QHC’s insurance status once the sale to Blue Diamond closes.
QHC’s 10 Iowa care facilities have a combined capacity of nearly 750 residents. The facilities are: QHC Mitchellville, QHC Winterset North, QHC Winterset South, QHC Madison Square, QHC Fort Dodge Villa, QHC Crestridge, QHC Crestview Acres in Marion, QHC Humboldt North, QHC Humboldt South and QHC Villa Cottages of Fort Dodge.